PAYE Discrepancies at HMRC

In this blog we look at why your Payroll Figures Don’t Always match with HMRC.

If you’ve ever logged into your HMRC portal account and noticed that the payroll figures don’t match what the figures are on the P32 for the relevant month, you are not alone!

Unfortunately this has become a common issue, but it doesn’t always mean something is wrong.

What is a P32?

The P32 is a monthly summary report from Xero which shows PAYE, NI, student loan deductions etc that are due to HMRC. It also shows what credits have been applied to reduce what is due - mainly Employment Allowance, but can include Statutory payments (e.g. SMP/SPP) and refunded PAYE to employees.

The P32 is what we use to let you know what needs to be paid in regards to your payroll liabilities.

HMRC portal

Here you will see HMRC's running totals of the submissions and payments received. In theory, this should match our P32 report as well as the payments made from your bank with the amounts we have informed you to pay. 

The reference number we provide you with has a suffix eg 2603 which should indicate to HMRC that that payment should be allocated to the 25/26 tax year (26) and the third month of that year (03) so in this case we would hope that your payment would be allocated to the June liabilities. HMRC however do not always adhere to this, and allocations can be random, but once allocated, these can still move around. 

This can be wrong sometimes where a payment has been missed, or HMRC records don't match our submission details. The RTI submissions are sent via Xero, and we liaise with both parties to try to determine where the glitch is happening and often no one can accept blame, therefore leaving us at Co- stuck between the two parties who point the finger at one another.

We often hope that HMRC will catch up and it will iron itself out, or in the cases where payments have been allocated to the incorrect month that these can be re-allocated so we can understand things more clearly. But unfortunately this is not always the case. 

How do discrepancies arise?

It's not always possible to see where discrepancies arise, and we have to assume it is a problem of the interface between software and HMRC.   At Accountex (the accounting industry's annual trade show) we established that this happens with all software providers. 

In Xero it mostly seems to happen when corrections are made to previously posted payroll.  In theory corrections overwrite older reports. See https://co-accounting.co.uk/qanda/how-do-i-correct-payroll-on-xero?rq=payroll for our Q&A relating to corrections to payrun.  

However the new information does not always seem to land on HMRC side.

Finding the mismatch

Sometimes doing a quick check can uncover the error quickly, and we do this as part of the normal service. 

Sometimes it is as simple as realising that a payment was missed. Though sometimes this missed payment might be historic, and subsequent payments are allocated to months where there is a shortfall, instead of to the month that it was intended for, and when this happens across tax years, it can be harder to distinguish.

As you may imagine, this can be very time consuming as uncovering a problem we have spotted, often leads to uncovering further problems, and can often result in hours of trying to understand what is happening.

Occasionally a deeper dive is needed where we need to compare month by month, deduction by deduction and payment by payment. This is done as standard as part of the annual accounts reconciliation at the business year end. However if you want/need this done outside of this time, it is a chargeable service as it can be several hours of detailed investigation.

We liaise with HMRC to raise a dispute if necessary once the error has been identified and will advise you if there is something to pay.

Corrections

We have had many instances of contacting HMRC in regards to these types of issues, and once a discrepancy has been raised they give us a timeline of up to 24 months for things to be resolved! This was not helped when HMRC had industrial action between 23rd December 2024 and 16th May 2025 caused significant delays and disruptions to their services.

We recently had a success where after 10 months, a client's portal was looking more like what we would expect, and this was achieved by raising the dispute, and just waiting and putting trust in HMRC that the discrepancy would straighten itself out over time.

How are we trying to manage this?

After many talks (and we are still in talks with Xero and HMRC), we are trying our best to minimise any differences by supplying suffixes to reference numbers so that we can at least see where payments should have been allocated. 

When running the payroll, we ensure that payroll is not posted before it has been approved, and if there are any changes after this, we submit an unscheduled separate payrun instead of amending the submitted one to avoid any duplication of figures being submitted. 

If we do spot errors, we try to see if there is a simple reason, and if not we immediately raise a dispute to HMRC and let them take over and keep a regular check on the portal whilst they do their work in the background.